Nuclear power

Technology transfer

Selling Westinghouse is lucrative but controversial

GOVERNMENTS—especially Britain's—are not known for being canny investors (see article). But the purchase and sale of Westinghouse, an American builder of nuclear reactors, by state-owned British Nuclear Fuels (BNFL) may prove a lucky exception. BNFL bought Westinghouse in 1999 as a prelude to possible privatisation. As BNFL's troubles mounted, however, the prospect of a float receded. When it said in July 2005 that it planned to sell Westinghouse, the response was instant. Fifteen bidders sprang into action, quickly whittled down to four.

On January 24th BNFL announced Toshiba, a huge Japanese power-to-electronics conglomerate, as its preferred bidder—meaning that it had all but won the contest. No price had been confirmed as The Economist went to press but a figure of $5 billion (£2.8 billion) was widely rumoured—more than twice the original prediction and over four times the $1.2 billion that BNFL paid for it.

That's because the nuclear industry is in its most optimistic mood for years. Worries over climate change, energy security and high fossil fuel prices have encouraged several countries to consider (re)investing in nuclear power. George Bush has called for new reactors in America. China is committed to building dozens of new plants by 2020, and several European countries are flirting with the idea as well. Indeed, the British government launched the consultation phase of its energy review—which many think is designed to prepare the ground for a new set of nuclear plants—on the same day that news broke of the Westinghouse deal. The International Energy Agency reckons that around $200 billion will be spent on new nuclear power stations over the next 25 years.

If the deal goes through, it will give Toshiba a chance to capture a big slice of that spending. Westinghouse has designed half the world's existing reactors, and it is already active in China. Officials there have decided to build pressurised-water reactors—a technology that Westinghouse specialises in—rather than the boiling-water designs offered by Toshiba.

Such rosy prognostications have caused critics to question the government's decision to sell just as nuclear power looks set for a renaissance. They argue that there is more money to be made by hanging on to Westinghouse than by selling it. Some detect the influence of the Treasury, pointing out that a sale would improve the rather sickly public finances. And there are worries about the implications for any new British reactors.

Ian Fells, an energy consultant, thinks that, without Westinghouse, Britain may find its nuclear ambitions thwarted: “If and when we decide to go down the nuclear route there will be a queue at the nuclear power-station builders. If that queue is to be jumped our best chance is owning Westinghouse, not selling it,” he says.

The government defends its decision on the grounds that, if it does decide to build more power plants, owning a major reactor-builder could lead to competition problems. And it argues that Westinghouse's Asian ambitions are unacceptably risky for a company owned by taxpayers. Malcolm Grimston, a nuclear expert at Chatham House, a think-tank, points out that any Westinghouse-owning government would be on dodgy ground if it decided it wanted new nuclear stations in Britain: “If Westinghouse won the bidding, people would suspect it had been fiddled,” he says. “But if they didn't, it would imply that the British government had no confidence in its own technology.”

Another reason may simply be that the government has looked at the evidence and drawn a logical conclusion. Its record on running civilian nuclear power projects is one of constant delays and huge cost overruns. Better, surely, to sell its assets to more capable managers and pocket the cash, buying future services as needed.